Highway violence hurts business in Latin America

Juliana Machado / ISH

Violence and robberies on Latin American highways cost businesses more money than anywhere in the world, says the Economic Commission for Latin America and the Caribbean (ECLAC).

On a scale where “1” signifies that crime and violence are causing significant losses and 7 means there are no effects, all of Latin America, with the exception of Chile and Barbados, are below the global average of 4.6, according to the ECLAC study “Security of the Terrestrial Logistical Chain in Latin America.” Latin America and the Caribbean average 3.3.

“From the point of view of the businesses, the lack of security impacts operating costs, increases the price of products and makes them less competitive internationally,” said Gabriel Pérez-Salas, who authored the study. “Criminal acts against supply chains affect a country’s image, increase the feeling of insecurity among the population, reduce tax revenue, discourage private investment and increase prices.”

The effect on countries translates into a reduction in economic growth and social development, Pérez-Salas added.

ECLAC cited the difficulty of calculating economic losses caused by merchandise theft from land transport in the region because statistics tend to underestimate the crime. Some analysts calculate that global losses may be as much as US$30 billion annually, according to the report.

In Central America and Mexico, the competitive advantages resulting from the geographic proximity to the United States market may be offset if businesses are unable to ensure operational continuity, the ECLAC study says.

“The phenomenon of cargo theft is nothing new – it’s been around for more than 30 years – and it continues to grow. There are no forecasts for a reduction,” said Brazilian specialist Sérgio Luiz Hoeflich, coordinator of the Network of Corporate Risk Management Professionals (GRISCO).

Brazil is identified as one of the most dangerous countries in the world for the terrestrial transport of cargo, alongside Mexico, Colombia, Guatemala, Bolivia, El Salvador and Honduras.

The electronics, pharmaceutical and food industries are the most affected industries in Brazil, according to ECLAC.

“Technically, Brazil has access to the most sophisticated technology in the world for controlling cargo theft, but it continues to take place,” Hoeflich said. “The solution to the problem is more political than technical.”

In the case of Mexico, ECLAC has called attention to a lack of statistics. The study cites data from Freight Watch, an international logistics security services company, which show the country has the highest risk rates in the world for terrestrial logistics chains.

Beverages, cigarettes, household appliances, pharmaceutical products, textiles and construction materials are the most common targets for thieves.

It’s estimated the cost for lack of security exceeds 15% of Mexico’s gross domestic product (GDP), according to the report.

In Central American countries such as El Salvador, Guatemala and Honduras, most of the robberies are carried out by gangs and armed groups that operate in the region. It’s common for companies to pay gangs so they won’t rob them, ECLAC says.

In Central America, the violence caused by organized crime costs approximately 7.7% of the region’s GDP, according to a World Bank study.

Even in Chile, where the impact of violence on businesses is among the lowest in the region, the problem remains a concern. The ECLAC study shows that losses caused by theft total about US$240 million per year for large companies alone. Food, alcoholic beverages and copper are among the products most targeted by thieves.

The growing organizational power of the gangs operating in Latin America, the crime’s profitability and the relatively weak penalties associated with cargo theft have resulted in an increase in the crime, Pérez-Salas said.

It’s imperative countries work together to protect cargo shipments since it is common for gangs to operate in numerous countries. However, private solutions adopted by some companies, such as armed escorts or the self-defense of carriers “not only have been ineffective at solving the problem but also have increased costs and the feeling of insecurity among the population,” according to ECLAC’s study.

ECLAC recommends cooperation among governments, police forces and customs offices. The idea is to create an infrastructure network to provide regional support, which will allow for safe parking and services for truckers, the presence of guards and monitoring.

But the lack of infrastructure and security for operations, obsolete technical regulations and the informality with which terrestrial transport is conducted in much of the region must be overcome before the cargo transport sector can become safer.

“The importance of security is such that businesses or companies with high risks associated with their logistics chains may be left out of the international market, regardless of the price being offered,” ECLAC says.